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Alistair Darling’s ‘last budget’ was a political speech rather than a serious announcement about how to tackle the problems of the economy.
“It was much ado about nothing” said John Brazier, Managing Director of PCG, the voice of freelancing. “In reality it was the ‘pre-Budget’ Budget. Like the rest of the country I will be waiting for the real Budget which will happen after the General Election. Frankly, the freelance community has little to take away from the ‘red book’, as we expected.
No real ‘new’ changes have emerged, with key changes affecting PCG members having already been announced previously — such as the increases in national insurance for employers and employees.
Anne Redston, Visiting Professor of Taxation at King’s College London, who is analysing the budget for PCG, said: “In terms of the big picture, there are many promises – such as the £20 billion efficiency savings – but no real detail. In the context of PCG members, the holding of Capital Gains Tax to 18% is good news and increasing the number of public contracts awarded to small and medium-sized business to 15% of all contracts is probably helpful.”
John Brazier summed up his views: “In some ways the Government has seemingly done nothing to harm us. However it is in the ‘real’ Budget after the General Election where PCG will be expecting genuine progress for freelancers, contractors and micro-businesses. The flexibility they provide to the economy must be recognised”
PCG will be providing members with a full analysis of the Budget on its website at www.pcg.org.uk.
Martin Hesketh, managing director of contractor accountant Brookson, outlines his initial assessment of how the flexible workforce will be affected by Alistair Darling’s third budget as Chancellor of the Exchequer:
“To summarise, not a bad budget for SMEs, with help on business rates, capital investment allowances and a doubling of entrepreneur relief allowances against Capital Gains Tax (CGT). On the other hand, freelancers and contractors have once again been ignored by this government. The only announcement during the budget speech that may benefit some contractors directly is an extension to the time to pay scheme, and frankly, that benefits HMRC just as much.
“By taking off some of the pressure that tax bills put on cash flow through the measures in the scheme it means that HMRC will get their money later, rather than not getting it at all which is what happens if a struggling business is shut down due to non-payment.
“I need to work through the details in the supporting documentation published in support of the Chancellor’s speech, but I was encouraged by the measures he outlined for some major infrastructure projects including, the high speed rail link, and investment in nuclear and green energy projects. Both of which may lead to significant opportunities for consultants and freelancers in engineering sectors.
“I was also pleased to see investment in universities, creating additional places on core subject courses such as science, technology and maths. The need for these skills is imperative to sustain the UK’s reputation as a pioneers in engineering.. However, it will be around 10 years before these students start to feed into the flexible workforce.
“Two other areas of the flexible workforce that the Chancellor did obliquely help are the computer gaming industry and social care.
“He made the point of fixing the thresholds for inheritance tax in order to pay for additional retirement benefits for residential care. This is a bad thing for anyone who has invested wisely, particularly as the property market is once again growing. However, it presents a good opportunity for contractual social care workers.
“Although he was keen to help the gaming industry he ignored the commercial software industry. While computer gaming is a strong export industry, the European Commission has identified commercial software as not only a growth industry, but a strategic innovator and driver of more general IT and business growth. This is a major employer of freelancers and contractors, so I am obviously disappointed that he missed this particular opportunity.
“Overall, it’s more of an election budget than one of strategic economic importance. It does some good to small businesses and little harm to contractors. Yet, while government policy in employment is to encourage flexible working practices, it has historically failed to carry this through in its fiscal policy. This budget does not do anything to change that, so while contractors will find it disappointing, I don’t think anyone will be surprised.”
Specialist Contractor accountancy firm, Danbro , has said there were no ‘major surprises’ in this year’s Budget, and that the Government has missed another chance to make some real positive changes for the SME sector.
Alistair Darling dubbed his third Budget, and his last before the general election, as the ‘Budget which would set out a route to long term recovery’ for the country’s weakened economy.
There was some help announced for the SME market in general, with a fundamental feature of this recovery plan being a package to increase investment in small and medium sized businesses. However, there was nothing that specifically targeted the contractor sector.
Damian Broughton, Danbro MD, said: “We were already aware of the major items in the Budget that will affect our clients. For example, the increase in National Insurance rates of 1% from 6 April 2011, the 50% income tax rate for people earning over £150,000 from 6 April 2010 and the restriction to tax relief for pension contributions for high earners.
“We are somewhat disappointed at yet another wasted opportunity. The government say that they want to encourage flexible working practices, but when the opportunity arises to introduce fiscal measures to encourage this, no action is taken.”
Sombrilla, a specialist accounting firm which provides umbrella services for contractors and freelancers, has said that this year’s Budget will only affect very high earners, and will not have any major negative effects for the majority of its clients.
Alistair Darling dubbed his third Budget, and his last before the general election, as the ‘budget which would set out a route to long term recovery’ for the country’s weakened economy.
The Chancellor announced several changes that will have some impact on the contractor sector, such as the increase in National Insurance rates of 1% from 6 April 2011, the 50% income tax rate for people earning over £150,000 from 6 April 2010 and the restriction to tax relief for pension contributions for high earners.
Fears that the government was set to re-introduce income-shifting proposals and increase IR35 powers were proven to be unfounded for now.
Jeremy De Lord, of Sombrilla, said: “Many contractors feared they would be hit hard by this year’s budget, so there is a lot of relief all round.
“The increase in National Insurance rates is going to affect everyone, and some contractors and freelancers may decide they want to incorporate rather than be part of an umbrella company, as this may make savings for them in the future. However, as the second rise is set for after the general election, it is not yet set in stone.
“In general, this was an unsurprising Budget, which will not have much of an impact on our market.”
Image by Downing Street
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Mar 26, 2010
at 12:56 am
Nice insights. I believe that the budget hasn't much affected freelancers and contractors. There is always this room for flexibility in the freelancing/outsourcing world and we can just wait for legislation to male it narrower for us. But until then, nothing is much affected.